S&P Global US Manufacturing PMI™: Sharper Contraction in August

The August S&P Global US Manufacturing PMI™ fell to 47.9 from 49.0 in July, signaling a stronger downturn in operating conditions. The August reading was higher than the expected 47.0 reading.

Here is an excerpt from Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, in the latest press release:

"US manufacturers reported another tough month of trading in August. Output has fallen back into decline after a brief respite in July amid an increasingly steep deterioration in order books. Orders are in fact falling faster than factories are cutting output, suggesting firms will need to continue scaling back their production volumes into the near future.

"An increasing sense of gloom about the near-term outlook has meanwhile hit hiring and led to a further major pullback in purchasing activity.

"The survey meanwhile adds to evidence that the deflationary impact of improving supply chains has peaked, with prices starting to rise at an increased rate again in August. However, falling demand is clearly continuing to dampen pricing power and is keeping overall inflationary pressures in the manufacturing sector very subdued.

"Policy initiatives such as the CHIPS and Science Act and IRA should start to help buoy production in the medium term as capacity in US manufacturing is expanded. A shifting of the inventory cycle toward restocking should also be evident by the end of the year, given improvements in some survey metrics such as the orders-inventory ratio. However, such rays of hope remain currently overshadowed by business confidence turning lower, which indicates that producers anticipate some further near-term headwinds to any manufacturing revival." [Press Release]

Background on the S&P Global US Manufacturing PMI

The S&P Global US Manufacturing PMI™ measures the activity level of purchasing mangers in the manufacturing sector through a questionnaire of ~800 manufacturers. The reported headline number is a weighted average of New Orders, Output, Employment, Suppliers' Delivery Time, and Stocks of Purchases. The S&P Manufacturing PMI is a diffusion index, meaning that a reading above 50 indicates expansion in the sector and a reading below 50 indicates contraction.